• Welcome to the LegalBeagles Consumer and Legal Forum.
    Please Register to get the most out of the forum. Registration is free and only needs a username and email address.
    REGISTER
    Please do not post your full name, reference numbers or any identifiable details on the forum.

BANKS and Vulnerable Consumers

Collapse
Loading...
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • BANKS and Vulnerable Consumers

    From the OFT PCA Report

    First, there seems to be a significant cross subsidisation from those consumers who incur insufficient funds charges to those who do not; and to a considerable extent this is from socially vulnerable, low income and low saving consumers to higher income, higher saving ones.
    Vulnerable consumers
    5.66 In line with current account holders generally, 66 per cent of basic bank account holders have
    never switched (compared with 64 per cent for all respondents), and 24 per cent222 have
    switched only once. Furthermore, 80 per cent of those on low income (76 per cent of basic
    bank account holders) who had never switched had never even considered switching
    (compared with 74 per cent for all respondents). This means that 55 per cent of consumers
    on low income have never considered switching their accounts.
    5.67 Results from our consumer survey show that, when switching did occur vulnerable
    consumers generally consider the same things important as when they are looking to open
    an account for the first time. There are, however, some differences. Among those
    consumers with low savings, those who were switching account providers were significantly
    more likely to take into account the products and services on offer than those looking to open
    an account for the first time (20 per cent compared with eight per cent). Furthermore, among
    consumers on low income, those who were switching banks were more likely to take into
    account lower charges or a free/low charged overdraft than those opening an account for the
    first time (eight per cent compared with two per cent).
    5.68 A majority of low income consumers from our consumer survey (69 per cent) considered that
    they lacked the required knowledge to choose between current account providers. Only one
    of the price comparison websites we looked at currently offers consumers the option of
    comparing basic bank accounts.

    4.124 In general, vulnerable consumers face many of the same issues that affect other consumers
    in the current account market, such as poor understanding of current account features and
    charges. Problems faced by vulnerable consumers can, however, be more pronounced and in
    some instances unique to this category of consumer.

    4.116 Another key message from our discussions with consumer groups was the adverse effect
    that the fear of incurring charges can have on the vulnerable. This is confirmed in a report by
    Bacs169 which refers to customers’ perceived fear of:
    • losing control of their bank account or balance
    • companies being able to remove money whenever they choose
    • banks making mistakes, for example with direct debits, taking out too much money or
    taking money on the wrong date
    • the impact that charges would have on their budget, and
    • not trusting their ability to save enough money or have the required funds to make
    regular payments.

    How vulnerable customers operate current accounts
    Use of current accounts
    4.108 The issues that arise for vulnerable consumers are similar to those with conventional current
    accounts but with some key differences. In line with other consumers from our consumer
    survey, vulnerable consumers tend to use in-branch banking to deposit cheques (44 per cent),
    to deposit money (43 per cent), and to withdraw money (41 per cent). They were unlikely to
    use telephone banking (55 per cent don’t use telephone banking compared with 45 per cent
    of all current account holders) or internet banking (59 per cent don’t use internet banking
    compared with 48 per cent of all current account holders).
    4.109 The major difference between mainstream current accounts and basic bank accounts is that
    a basic bank account seldom has a cheque book facility and never offers an overdraft. The
    lack of an overdraft, whether arranged or not, removes an element of interest rate and
    charge costs that can affect account holders. However basic banks accounts can still incur
    unpaid item charges.
    4.110 Charges are a significant issue for vulnerable consumers. For example, when using a
    mainstream current account, respondents with savings of less than £1,000 were the most
    likely groups of consumer to use arranged overdraft. Twenty one per cent of this group said
    they were ‘permanently’ overdrawn, and a further 25 per cent said they were ’usually’
    overdrawn. In other words almost half this group of people is habitually ‘in the red’.
    4.111 Our consumer survey showed that the best predictor of whether a consumer has incurred
    charges is whether they are financially constrained.163 For example:
    • those with less than £1,000 in household savings were significantly more likely to have
    been charged in the past 12 months for going into their unarranged overdraft164 (48 per
    cent compared to 18 per cent of those with at least £1,000 of savings)


    Box 2.5: Factors that can contribute to consumer vulnerability43
    • Age (either young or old) – for example, teenage householders may include a
    disproportionate number of students (who may have high debts), while the over-80s may
    include a disproportionate number of those with mobility problems or dementia44
    • Visual, hearing or mobility impairment – for example, the elderly or disabled can face
    difficulty in using telephone, internet or branch banking services
    • Learning difficulties or confusion (dementia) – limited ability to understand product features
    or charging structures
    • Restricted communication – no access to telephone or (increasingly) the internet means that
    consumers can be limited in their banking options
    • Language – either being unable to speak, read or write English sufficiently well, or those
    who are comfortable with English but have difficulty understanding the literature used by
    banks. This is especially important when trying to open accounts or understand the account
    features available
    • People living in rural or deprived areas – may have limited access to, and choice of, branch
    networks or banks. This problem can be exacerbated by branch closures
    • People with difficulties demonstrating permanent residence – for example ex-prisoners or
    recent immigrants may face difficulty satisfying the identity criteria for opening an account, and
    • Those who are financially constrained – including those with debts or who are unemployed,
    leaving them vulnerable to a sudden change in their financial circumstances.
    #staysafestayhome

    Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

    Received a Court Claim? Read >>>>> First Steps

View our Terms and Conditions

LegalBeagles Group uses cookies to enhance your browsing experience and to create a secure and effective website. By using this website, you are consenting to such use.To find out more and learn how to manage cookies please read our Cookie and Privacy Policy.

If you would like to opt in, or out, of receiving news and marketing from LegalBeagles Group Ltd you can amend your settings at any time here.


If you would like to cancel your registration please Contact Us. We will delete your user details on request, however, any previously posted user content will remain on the site with your username removed and 'Guest' inserted.
Working...
X